The Facebook page of Conservative Party leadership aspirant Maxime Bernier posted the following image with the question “Which of these economists do you prefer?”:

WHOA, wait a minute.

What is going on here? Have we entered the Bizarro World? Does Spock have a beard?

The four economists in the picture are amongst the hardest of the hardcore free market economists in history.

The mere fact that this multiple choice question was posed with these four options makes us kind of like Maxime Bernier’s style. The fact that Murray Rothbard is in this list at all is frankly shocking. In a good way.

So here’s what you need to know:

Someone who seems to like the Austrian School of Economics is running for leadership of a major Canadian political party. This is almost too wonderfully weird to believe.

Bernier has already proposed abolishing the CRTC, ending monopolistic supply chain management, having a more laissez-faire approach to air travel, privatizing Canada Post, and replacing corporate welfare with lower taxes for all corporations. Bernier is showing that he will attack sacred cows in Canada’s reflexively progressive political discourse.

Now comes this Facebook post, intimating that underlying these consumer-friendly proposals is at least some solid classical liberal economic foundations.

Honestly, as far as Canadian politics goes, that might be the best we’ve seen in the last century. Maybe we will see someone approximating a real classical liberal leading one of Canada’s main political parties.

Man, Economy and State presents the entire corpus of economic law, deduced logically from the undeniable fact of human choice. Truly embodying the Austrian methodology, Rothbard was a system-building rationalist, and so this book has little resemblance to mainstream economics. Following Mises’ “praxeologic” approach, Rothbard builds economics not on models or mathematics, but using primordial logical principles to explore the formal implications of purposeful human behavior. (It is interesting that Rothbard was a mathematician before coming to the economics field, so this choice is especially notable.) His treatment gives economic law a vividly real actuality not commonly present in writings on the subject. Unlike most economists, Rothbard never forgets he’s talking about real people.

Rothbard not only presented Austrian economics in a systematic, complete way — he also advanced it considerably. Some examples of his contributions to the hard-“core” of Austrian economics: (1) he refined and improved the theory of marginal utility significantly, (2) he greatly elaborated and developed theories of production (although I believe his theory of interest is not strictly correct), (3) reconstructed the approach to welfare-economics, (4) demolished the illusory free-market monopoly problem.

Also crucial to his economic theory was his in-depth analysis of violent intervention in the market. This was originally relegated to a separate volume because the publisher thought it was too radical to print as part of the main treatise. The Scholar’s Edition of Man, Economy, and State includes Power and Market, as it was meant to be. Here, Rothbard drives the final nail in the coffin for virtually any argument that the government do anything positive for the economy. He exposes all forms of intervention as leading to impoverishment. Power and Market concludes with a critique of anti-market ethics. This section is effective because Rothbard himself relies on no ethical argument, but the simple exposure of logical flaws and erroneous reasoning in traditional complaints about the market.

Rothbard also recognized that economic and ethical problems have the same, fundamental root: scarcity, without which neither discipline would be at all meaningful. This connection was critical for Rothbard as he later developed his political philosophy, which was systematically presented later in The Ethics of Liberty (1982).

Considering Rothbard completed this treatise when he was only 36, his level of scholarship is nothing short of incredible. He tackles the questions of contemporary economic journals along with the classic problems. His footnotes are full of treasures.

This is truly one of the most important works of economic theory ever written. Indeed, it covers everything, and Rothbard’s clear, tempered prose is unrivaled in either philosophy or economics. Anyone who is alive should read this book. If you’re dead and you can read, well… that’s amazing, but still the book won’t be much used to you.

(This review was originally published in 2005.)

— Purchase Man, Economy, and State from Amazon for cheap here, or read it for free online here. —

There is no way I can say all that I want to say in this review. Murray Rothbard has aptly said: “Every once in a while the human race pauses in the job of botching its affairs and redeems itself by producing a noble work of the intellect. . . . To state that Human Action is a `must’ book is a greater understatement. This is the economic Bible of the civilized man.”

I would take Rothbard’s praise further. This is not only the single most important economic tome ever, but also the pathbreaking, definitive exposition of praxeology, the correct basis for social sciences and also necessarily the foundation for epistemology. Only a few living economists of the “Austrian” school of economics seem to have truly absorbed the Misesian “praxeologic” method.

Mises’ contribution to economics cannot be understated. In basing economics on the axiomatic status of action, Mises established the ultimate foundation for economic science. The fact that humans act — that is, human beings act purposefully to reach subjectively chosen ends — is, of course, irrefutable (to argue against the axiom of action is itself an action). This, however, may seem like a trivial observation. Humans act, big deal? Why is it so important? Its importance is in praxeology’s methodology, which uses deductive chains of reasoning to realize the implications. In understanding what is implied by action — values, ends, means, choice, cost, preference, profit, and loss — economic science can be deduced logically, so it is a purely an a priori science where economic laws tell describe apodictically real relationships in the world. In this way, key economic principles follow from the action axiom (as well as a few general, explicit assumptions about the empirical reality in which the action occurs), such as the law of diminishing marginal utility, how taxation changes time-preference schedules, the counterproductive nature of interventionism, involuntary unemployment, and so on. So long as the logic deriving the principles is correct, then economic laws are a priori-valid, and empirical testing has no bearing on them.

This book initially appeared in a difficult time, when positivist methodology and the Keynesian paradigm were dominant. Thus, upon Human Action‘s release it was mostly derided and ignored by the mainstream, rather than studied and criticized. It did, however, gain notoriety among academic circles for rebuilding economic science from the ground up, all the while plowing through the epistemological shortcomings of previous standards. It also sold surprisingly well for a nearly 1000 page book about economics.

Mises provided considerable ammunition for institutional critique in Human Action. He uncovered the socialist calculation problem — a central planning authority has no rational way to allocate resources for production without market prices — and this is an insurmountable hurdle for any state-run economy. In fact, when analyzed fully, it shows that any government intervention in the economy results in market distortion and inefficiency. In essence, nothing can ever be provided more efficiently by the government nor can the government do anything to make the market more efficient. Murray Rothbard, who was of course Mises’ student, explored this thoroughly in his critique of interventionism, Power and Market.

Lee Carlson’s shamefully inane review can be wholly disregarded. He believes economics can benefit from aping the methods of physics, when actual physicists and engineers recognize that is foolish. Carlson fallaciously appeals to authorities, and it does not change the fact that the search for mathematical constants that describe human choice is futile. If it is possible to learn and have different ideas in the future, which cannot be denied without contradiction, then you cannot know in advance how one will act based on new ideas. That’s why economics must deal with the formal implications of choice, and not the formation of specific choices. Mises understood this. Few other economists do.

In regards to the reviews criticizing Mises extreme rationalism, they would do well to better understand Mises’ methodology and the epistemological problems of economic science. He spends nearly 200 pages early in the book discussing this, but people are lazy and think the rationalist foundations of economics is “boring” or somehow not relevant.

To Mises, ultimately, all economic laws were derived from the incontestable axiom that, trivially enough, humans act, choosing between alternatives in a finite universe. In understanding the effects of different forms of economic activity, the economist must determine correct theory by relying on human choice as the guiding factor. To consider the effects of a change brought about by action, we need recognize that by taking certain choices, the opportunities for other choices are destroyed. And because the relationship between these universes resulting from different choices are a priori related to the others, there is no need to rely on empirical confirmation for correct theory. The corpus of economic science is essentially a system of counterfactual laws where empirical testing is completely useless.

It would be foolish to argue that consumption need not be preceded by production, or that that which is consumed now cannot be consumed later, just as it would be foolish to argue that money inflation does not raise prices higher than otherwise, just as it would be nonsensical to argue that 1+1=3, just because of an “observation.” Like a mathematical proof, all economic laws must be refuted by identifying errors in the axiomatic-deductive chain, not finding “conflicting” data. This is also the only truly valuable way to understand complex economic phenomena. For example, were rising real incomes in Canada 1950-1990 a result of increased taxes, or despite of more taxes? Would they have been higher still with higher or lower taxes? The traditional economist is utterly helpless, because they have actually rejected economic theory in favor of a misguided empiricist prejudice. Praxeology is more valuable than any mathematical model because of of its method. They require no qualifying considerations (“all things being equal” or “ceteris paribus”) and are always true.

Finally, the original issue of the Scholar’s Edition was a BEAUTIFUL book. It really shows how a physical book can be damn sexy in a way that ebooks and such can never be. From the Mises Institute:

“The Scholar’s Edition is printed on stunning, pure white, acid-free Finch Fine 50 lb. paper; carefully set in the readable and beautiful Janson typeface, including the 1954 index, the most comprehensive ever done; covered in spectacular dark azure Odyssey cloth from Prague, the finest natural-finish, moisture-resistance book fabric in the world; secured by the finest caliper Binders board; protected by an impressive slipcase from the famous Old Dominion company; graced with antique-soapstone endpapers from Ecologic Fibers; casebound with the strongest Smyth-sewn signatures; fitted at head and foot with silken endbands, thick wrapped for durability; complemented with a double-faced, satin-finish ribbon marker; stamped with brilliant, non-tarnishing gold foil from Japan’s Nakai International; and produced at R.R. Donnelly’s famed Crawfordsville Bindery, where’s America’s finest books are assembled.”

Pretty delicious, actually!

The Scholar’s Edition also features an exhaustively compiled index and — most importantly — restores all the ambiguities and deleted material from the third and fourth editions. In particular, Yale University Press’ complete butchery of the 1963 edition is now nothing more than a bad memory.